I ditched corporate America in 1994 and started a management consulting and venture capital firm (http://petercohan.com). I started following stocks in 1981 when I was in grad school at MIT and started analyzing tech stocks as a guest on CNBC in 1998. I became a Forbes contributor in April 2011. My 11th book is "Hungry Start-up Strategy: Creating New Ventures with Limited Resources and Unlimited Vision" (http://goo.gl/ygaUV). I also teach business strategy and entrepreneurship at Babson College in Wellesley, Mass.

Delphix Shrinks Database Complexity 100-Fold

One of the big headaches for people who manage IT is the complexity of the databases that store and retrieve the company’s crown jewels of information. What makes them so complex is that standard IT processes are engineered to make so many extra copies of the same information.

But what if there was a way to cut way back on all that redundancy? How much money could an IT manager save? The answer, according to Delphix CEO Jedidiah Yueh, can be a very large number. In a March 9th interview, Yueh mentioned that a major global bank is saving $500 million over three years due to the boost in productivity it gets from Delphix technology.

Before examining how Delphix’s product does that, it’s worth pointing out that Yueh brings an impressive background to the challenge. EMC (EMC) bought Yueh’s first company, Avamar, in 2006 for $165 million.

The reason was that EMC needed what Yueh called a data de-duplication strategy for its backup storage business. Avamar provided “data efficiency” technology that enabled companies to reduce the number of duplicate copies that they needed to store. In short, Avamar filled a hole in EMC’s data de-duplication strategy and has generated “over a billion dollars in sales for EMC.”

Yueh joined EMC as the VP of Avamar product management. But he did not stay there long. In 2008, he decided to leave EMC to take advantage of what he saw as a huge, under-served market for so-called agile data management.

Yueh expects Delphix to grow 300% in 2012 and it has already landed some impressive customers including Comcast (CMCSA), Holland America Line, and Qualcomm, (QCOM). He sees these customers coming from the $30 billion a year market for Oracle (ORCL) databases.

But since companies spend extra money on operations staffing and redundant hardware to handle all the duplicate data, Yueh estimates that Delphix’s market is $40 billion a year in spending, 90% of which he believes he can help companies reduce by eliminating duplicate copies of data.

While customers spend millions of dollars a year on Delphix’s software, Yueh believes that for every $1 they spend on the company’s product, companies are saving between $3 and $10.

The reason is that Delphix boosts IT productivity — for example, one of its clients, KLA-Tencor(KLAC), uses between 140 and 150 contract systems developers who before using Delphix’s software could complete two projects every six months — but now they can complete 11 projects in that same time.

And Yueh’s experience combined with Delphix’s performance has attracted $20.5 million in outside capital — including an initial $8 million round and a second round of $12.5 million in 2010. Among its investors are Greylock Partners and Lightspeed Venture Partners. Yueh picked firms whose partners had reputations for quality and integrity.

Delphix’s organization has grown rapidly. In 2009 it had 22 people and Yueh expects that figure to reach 120 by the end of 2012 — double the level at the end of 2011. And the staff is primarily a mix of people with backgrounds in engineering and sales.

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